Less take-home pay after enrolling in health plan

Is it legal for an employer to pay people not to take health insurance?  One of my co-workers who does exactly the same job as I do gets more in her paycheck, because she is not on the health plan.  She doesn’t have insurance at all, in fact.  It seems unfair that she gets paid more, just because she skips having insurance.

Feeling Gipped

Dear Feeling Gipped,

Yes it is legal. Employers can offer a set amount of money that the employee chooses to “spend” on benefits or to receive as taxable income. As long as each employee gets the same offer and is properly taxed on the money, it is perfectly legal.

Your co-worker going without coverage is not exactly kosher, however.  The health insurer probably asks that people who choose not to enroll give proof that they are covered somewhere else. The insurer wants to get a good cross section of the group, not just the people who see the value of having insurance.  This is the difference between group and individual plans.  In a group plan, everyone joins.  In individual plans, only the people who feel the need for coverage join.

In a way, you and your co-worker are not getting paid different amounts.  You are choosing to take part of your pay as health insurance; she is taking it in cash.  There is not anything you can do to change your co-worker’s choices.  Take comfort in knowing that a hospital or doctor could not take your house or your savings, if you got hit by a runaway clown car.

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.